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MARKETIN

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Savills Research

Residential SalesShanghai – April 2021

Policy Environment TightensSeveral strict policies were introduced during Q1/2021.

Savills plcSavills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

James MacdonaldSenior DirectorChina+8621 6391 6688james.macdonald@savills.com.cn

RESEARCH

Please contact us for further information

Savills team

“The credit environment of the real estate market has continued to tighten to prevent potential financial risks. The introduction of a point-based system in Shanghai gives further priority to first-time homebuyers while curbing speculation.” JAMES MACDONALD, SAVILLS RESEARCH

• Overall first-hand commodity residential supply decreased 59.2% quarter-on-quarter (QoQ) in Q1/2021 to 970,000 sq m, down 33.5% compared to Q1/2019.

• First-hand commodity residential transaction volumes increased by 11.9% QoQ to 3.2 million sq m, up 126.2% compared to Q1/2019.

• Average transaction prices increased by 6.2% QoQ to RMB55,800 per sq m and remained unchanged compared to the same time last year.

• Only one first-hand high-end apartment project, Ocean One (瑞虹新城天悦耀庭), launched during Q1/2021, offering 240 units to the market.

• First-hand high-end apartment transaction volumes increased by 58.1% QoQ in Q1/2021, totalling 268,000 sq m, up 21.0% compared to Q1/2019.

• Several housing regulatory policies were introduced during February and March, including new school districting policies, to help cool down the second-hand market.

• 11 for-sale residential land plots were sold in Q1/2021, including several core location land plots like plots in Yuyuan

Community, Huangpu District and Jiaxinglu, Hongkou District.

• 22 cities, including Shanghai, will limit the number of land sales starting from this year to three times a year. Details for land auctions in Shanghai has not been revealed yet.

Shirley Tang Senior DirectorShanghai+8621 6391 6688shirley.tang@savills.com.cn

Michelle Zhou DirectorShanghai+8621 6391 6688michelle.zhou@savills.com.cn

Siu Wing ChuChief Executive Officer China+8621 6391 6688siuwing.chu@savills.com.cn

RESIDENTIAL SALES

CENTRAL MANAGEMENT

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MARKET FOCUSPoint-based home purchase regulationTen new measures were introduced to the residential market of Shanghai, aiming to tighten the first-hand residential market on January 21st, 2021. Key policy measures include: divorced homebuyers will no longer be considered first-time buyers for a period of three years if they had owned a property during their marriage; the ownership period has been increased from two to five years before being exempt from paying a value-added tax (VAT) on the sale of a person’s home; a minimum five-year holding period is applied for homes bought based on point-based regulation. Measures requiring new commodity housing give priority to satisfying the needs of “no home” families and strengthening the supervision of pre-sales fund sources.

From February 6th, the points system will be officially launched for new projects with a subscription ratio of more than 130%. The total score is composed of the basic score and the dynamic score. The point system, while giving priority to “no home” families, also takes upgrade demands into account. The points system allows a ranking of eligibility. For investors and buyers who already own property and are eligible to buy homes, they can still choose suitable properties in the second-hand housing market.

OVERALL COMMODITY RESIDENTIAL MARKETFirst-hand Market - First-hand commodity residential supply decreased by 59.2% QoQ to 970,000 sq m, down 33.5% compared to Q1/2019. In mid-March, Shanghai Real Estate Trading Centre announced that 33 residential projects would be launched in the following weeks, which triggered buyer enthusiasm towards the market. Though most of the projects are located within areas of five new towns introduced early this year, high-end projects like Shanghai Bay (尚海湾豪庭) in Xuhui Riviera and Star River (上海星河湾) in Minhang are also on the list.

Transaction volume totalled 3.2 million sq m, up 11.9% QoQ and up 126.2% compared

to Q1/2019. Transaction performance has improved in areas within all ring roads compared to Q4/2020. Especially in areas within the inner ring road and area between the inner ring road and middle ring road, transaction volumes have increased 48% and 40.7% QoQ, respectively, indicating an active urban core market. Average transaction price increased by 6.2% QoQ to RMB55,800 per sq m, and remained the same as Q1/2020.

Second-hand Market - Shanghai’s second-hand housing market has maintained a high degree of popularity in the first two months of 2021. Transaction volume reached 3.4 million sq m in January, a new record since September 2016. Average transaction price of second-hand housing rose to RMB43,900 per sq m per month in February 2021.

Several housing regulatory policies were introduced during February and March to restrict sales, purchases and home loans. New policies related to school districting and enrolment allocation were also introduced during March, which helped cool down the school district-related second-hand market to some extent. While the point system targets the first-hand market, households looking to upgrade may be postponed, impacting second-hand supply. The rebound of market sentiment starting from 2H/2020 has now turned into a strong wait-and-see attitude.

HIGH-END RESIDENTIAL SALES MARKET Only one first-hand high-end apartment, Ocean One in Rui Hong Xin Cheng, launched during Q1/2021, offering 240 units (49,165 sq m) to the high-end market. First-hand high-end apartment transaction volumes increased by 58.1% QoQ in Q1/2021, totalling 268,000 sq m, up 21.0% compared to Q1/2019. Among those, Laoximen and Gubei recorded active transactions during the quarter: Shanghai Aroma Garden (露香园), Unione (中海建国里) and Art Park (古北中央公园) witnessed high transaction volumes. Meanwhile, the price index increased 3.5% QoQ, pushing prices to an average of RMB116,300 per sq m, down 0.4% year-on-year (YoY).

GRAPH 1: First-Hand Commodity Residential Market Supply, Transaction Volume And Prices By Quarters, 2014 to 2020

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GRAPH 2: Second-Hand Residential Sales Market Transactions And Prices, Jan 2016 to Feb 2021

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Source Shanghai Real Estate Trading Center, Savills Research

Source Shanghai Real Estate Trading Center, Savills Research

Type Items Points

Basic score (Total 60 pts)

Shanghai residence permit Yes:10 No:0

Marital status Married:10 Single:0

Currently owning property in SH No:20 Yes:0

Home purchase record within 5 years 0

Dynamic score (Total 24 pts)

No home purchase record within 5 years

Owning property in SH 5

Not owning property in SH 20

0.1-0.24 pts for each social security paid month since Jan 2003(unit point varies on project basis)

Source Collected from public resources

Residential Sales

TABLE 1: Point-Based Home Purchase Regulation

3savills.com.cn/research

Source Shanghai Real Estate Trading Center, Savills Research

GRAPH 4: First-Hand, High-End Apartment Market Transaction Volumes And Prices, Q2/2016 to Q1/2021

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GRAPH 5: For-Sale Residential Land Transaction Area (Buildable Area) And AV, Q2/2016 to Q1/2021

Source Shanghai Municipal Bureau of Planning and Land Resources; Savills Research

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Source Shanghai Real Estate Trading Center, Savills Research

RESIDENTIAL LAND MARKET11 pure for-sale residential land plots were sold with a total site area of 654,000 sq m in Q1/2021, a total buildable area of 1.2 million sq m and an average accommodation value (AV) of RMB34,250 per sq m. All residential land plots were sold before Chinese New Year, including several plots located in urban core areas. Land plots in Yuyuan Community, Huangpu District and Jiaxinglu, Hongkou District recorded AVs of around RMB90,000 per sq m, ranking them the second and third highest in residential land transaction history in Shanghai.

14 pure for-lease residential land plots were sold in Q1/2021, with a total buildable area of 831,000 sq m and an average AV of RMB4,650 per sq m, most of which are located in industrial parks of Pudong and Minhang.

RESIDENTIAL SALES MARKET OUTLOOKHigh-end residential supply will focus in Hongkou, Yangpu and Northern Lujiazui in Q2/2021. New batches of Nove Mansion (九庐)

and Xinjiangwan Shanghai Garden (上海院子) are anticipated to launch in Q2/2021. Bund in Time (新弘北外滩), Imperial Bund (招商外滩玺) in the North Bund and Arcadia (仁恒海上源) in Yangpu, all new projects, are also anticipated to launch in Q2/2021.

A new policy introduced during March indicates that home sales price caps will be set in new land sale documents of residential-zoned lands. Currently, first-hand prices are regulated by the pre-sale limits. With the implementation of the new policy, developers can better understand the profit level while bidding for new residential lands, making the market more transparent.

Also in the land market, 22 cities, including Shanghai, will limit the number of land sales starting from this year to three times a year. The change in land sales would likely soak up excess liquidity, pushing developers to improve their financial structure and be more cautious in bidding for new land. It is expected that the policy environment will remain strict throughout the year.

GRAPH 3: First-Hand, High-End Apartment Market Supply, Q2/2016 to Q1/2021

Source Shanghai Real Estate Trading Center, Savills Research

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PROJECTS DISTRICT AREATRANSACTION

AREA (SQ M)

AVERAGE TRANSACTION

PRICE(RMB PSM)

Lakeville V Huangpu Middle Huaihai Rd 5,788 169,800

Bund House Huangpu Huangpu Riviera 1,884 160,100

One Park Minhang Jinhongqiao 3,272 156,100

Shanghai Aroma Garden Huangpu Laoximen 22,672 152,500

The Bound of Bund

HuangpuHuangpu Riviera

304 150,000

Source Shanghai Real Estate Trading Center, Savills Research

TABLE 3: Top Five Apartment Projects By First-hand Transaction Prices, Q1/2021

APARTMENT VILLA OVERALL

SUPPLYSQ M 896,931 73,044 969,975

YoY (%) 85.2% 641.0% 96.2%

TRANSACTIONSSQ M 2,956,317 258,503 3,214,820

YoY (%) 242.5% 173.8% 235.8%

AVERAGE PRICERMB PSM 55,662 57,917 55,843

YoY (%) -0.3% 4.8% 0.1%

Residential Sales

TABLE 2: First-Hand Commodity Residential Market By Property Type, Q1/2021